Case study: Financial analysis
In order to answer the questions below you will need to conduct research and make assumptions. Please clearly indicate all assumptions you make throughout you answers to each question and cite any resources used using footnotes.
Question 1: Determine the sales price for a bag of popcorn. How did you come to this price?
Question 2: Identify major expenses for your business and research to estimate what you expect the costs will be. Determine whether the costs noted are fixed or variable. (Hint: keep all costs on a yearly basis throughout your analysis).
Question 3: Using this proposed pricing structure and expenses for the first year, calculate the number of bags of popcorn you need to sell to break even?
Question 4: Identify a location for our clients' business in the state of Maryland. Using population data (HINT: U.S. Census Bureau website) and additional information based on your target market, project the potential sales (revenue) for this business. Will it exceed your break-even point?
Question 5: Using the revenue information collected and the expense estimates, prepare an income statement (i.e., profit/loss statement) to calculate the projected profit/losses in year one for this business.
Question 6: After identifying the year one profit/loss for this business, create a bar chart showing profit projections over the first 3 years of business operation. What is the key take away from this chart?
Question 7: Should our clients open this flavored popcorn store? Why or why not?